I’m not fond of a family member acting as trustee for other adult family member’s trusts unless the other family member is not able to so. An adult family member should normally serve as his/her own trustee or a neutral party (like a bank) can be appointed (it’s worth the cost). I know from personal experience that this power can be abused and can tear a family apart.
I once read a cautionary tale about a will. The will had stipulated that each grandchild would be entitled to a small percentage of the estate overall. It was a huge estate. The will didn’t put an end date on it, like “any grandchild born within 5 years of my death”.
The spouse of a deceased child, mother of 2 grandchildren already, had remarried after her first spouse died. She unfroze embryos that they had saved years ago and managed to have at least one more grandchild! People will shake their heads and consider it a scandal that she had a child with her former, now deceased, husband (and what did her current husband think?). People will think the will is sloppy. But is it? What if the person making the will wanted to maximize the number of his or her genetic grandchildren?
Something to think about. I think it’s hard to make the perfect will, but it’s important to think out every scenario, even unlikely ones.
The weak link in the OP’s scenario is that there is only one person in charge of the disbursement of the money (or so it seems). Also, the two surviving children could drain all of it if there is some emergency, leaving nothing to the grandchildren. The main flaw is that the will was changed without the full knowledge and input of the adult children.
@Sue22, my kids are the beneficiaries of a pooled trust. The way they handled it was to split it legally once one of them started to draw from it. This seems like a fair way to handle situations like this.
The trustee and executor (the son) has a built in conflict of interest. If he doesn’t distribute much money to his mother and aunt, then there is more left for him.
Having S in charge of funds for his mom and sister’s life estates plus remainder to him and cousins can easily create awkward (and worse) family dynamics.
I remember my Wills and Trust professor saying “you haven’t seen anything until you’ve seen two sisters fight it out over Granny’s cameo pin”. No one is ever going to think it is fair.
It looks like the grandparents were trying to avoid double taxes. The trust is there in case the two daughters need something, but the intention is for the funds to go to the grandchildren. That’s how the grandparents wanted to do it. I hope it is clear in the trust whether the oldest and only child of one gets 1/2 of the trust (his mother’s share) or if all get 1/5th of the trust (5 grandchildren). My grandfather’s will was very poorly written and my father had 6 children and my uncle 2. I know my grandfather would have wanted all 8 to share equally but it wasn’t written that was. Luckily, he died with NO money so we all got nothing (and we were all fine with that).
I don’t think the trust is unusual. It’s what the grandparents want.
Yes, whomever their attorney is SHOULD be sure to clarify with the grantors exactly what THEY want and how THEY want things divided and then be sure that the language is clear that it is to be divided like that. It should also be clear as to what the two people with life estates are entitled to vs the grandchildren who will inherit the remainder. This can easily get VERY difficult.
@twoinanddone - yes, it’s clear. The grandchildren split evenly (five parts). The grandson who is the executor/trustee would have theoretically come out ahead if the estate had just been divided between the two daughters, as he is the only. Of course, that makes a LOT of assumptions about what his mom (my friend) would have done with the assets in the interim, how her will was structured, etc.
So, perhaps their motivation is for things to be more even with the grandchildren. I totally understand that. However, I think my friend would feel better about it if there was a clear distribution coming to her and her sister each year.
As someone said upthread, there is somewhat of a conflict of interest on the grandson, as he will want to preserve whatever is in there for himself. My friend pointed this out today. However, he is in the role as a fiduciary which calls for certain duties/standards/ethics, etc.
@HImom - yes - this is what I am concerned about - how the lifetime portion for my friend and her sister will work/play out.
How well off is your friend and her sister? Do they need additional assets or would it not really change their lifestyle much?
It would be good for grantor to make this clear to all — what happens if investments are poor in bad economy? Do life estate folks get nothing or can they deplete principal? What if one needs expensive 24/7 care? What if both need expensive care?
Is your friend from a culture that believes in placing men in dominant positions, regardless of the age of the people involved? Saudi culture where women are required to have a male guardian’s supervision and permission - even if that “guardian” is her son - is a well known example but there are plenty of other cultures where a male grandchild would be placed in charge of older female relatives. Possible that’s what’s happening here?
@doschicos - no they are not well off. The older sister was widowed about 15 years ago. Works as a cafeteria lady. Does some other small things? Never graduated from college. My friend has a state job. Her son makes far more than she does.
I don’t necessarily think that is relevant, however. I mean, it IS their money, and they can do whatever they want with it. But, it is simply different than what my friend expected and what previously existed. Until this recent change just a few months ago, it was always half to each daughter. The grandson/executor/trustee and his wife had a baby about a year ago. So now there is a great granddaughter. I think that might have been what precipitated the change, though I am not sure.
@milee30 - that is not the case here at all.
We set up our kids’ trust with two trustees- ourselves and a neutral attorney. The idea is that we can prevent them from doing anything stupid by invoking the attorney but they can use their money for a good purpose even if we don’t agree by doing the same.
I’ve heard of this being done – generally to save taxes.
This is a trust that really skipped generations
My father (my mother died much earlier) did generation skipping trusts leaving his estate to his 4 grandchildren. He established a trust with me as trustee for my children and he established another trust with my brother as trustee for his children.
He reasoned that neither my brother or I would need an inheritance and to avoid having more $$$ in my estate, he gave it to his grandchildren with the stipulation that my brother and I could get all the income (gains and dividends) from the trust if needed. Upon my death then the whole amount would go to my children.
Pop some popcorn for this one.
My MIL and boyfriend, about 20 years ago, wanted to buy a house together. Neither wanted to live in the house that each other shared with deceased spouses of 40+ years.
MIL’s boyfriend was FAR wealthier than MIL. Her kids (my H) insisted they get a legal document to protect her in case he died first and she suddenly had to pay for an expensive home. They pooled their money (he way more than her) and bought this ridiculously huge house and enjoyed it for several years, until he got ill and died.
Here’s the wild part. He left virtually all of his cash to her, in a trust, to allow her to stay in the Ridiculously Huge House, as long as she wanted. A boatload of money would be drawn down from the trust every month so she could continue to live in comfort. We just wanted her not to be homeless, not made royalty, but he set it up so she would continue in the lifestyle they enjoyed together. More than we wanted, but, okay. But felt kind of bad for his sons.
He left $0 to his two adult sons. And made one of the adult sons the executor. The will said that if my MIL passed, the remaining $ would go to the sons, the house would be sold, and half of the proceeds would go to his sons, and the rest to my MIL’s heirs.
So…it was in these two guy’s interest for my MIL to die, and quickly. We were not terribly comfortable with this situation, picturing one of them pushing her down a flight of stairs.
We eventually learned that MIL’s boyfriend had given both sons millions of $ over the years and they frittered it all away . Hence, the major snub from Dear old Dad.
But making one of them write a whopping check to his dead father’s girlfriend every month, that had to hurt. Didn’t seem necessary.
Well, a few years go by…and my MiL has settled into her role as Queen quite nicely. In fact, she got exceptionally good at making requests for every little thing. As in she refused to change a light bulb herself. Eventually, Executor Son has had enough. Went to see a lawyer. Turns out in this 50 page document, MIL’s Boyfriend buried an ‘out clause.’ It basically says that the boys can declare the Will null if they feel like it. No one, including the lawyer originally hired to set up the estate, bothered to read the whole thing…the ‘out’ is on the last page.
Sons took MIL to court. and won. My then 90 year old MiL was ordered to vacate the house by the judge. He ordered it sold and she would get half of the proceeds.
Now, my MIL was NOT going to leave that house. She would have made the sheriff drag her out of there. So,
Instead of MIL being kicked onto the street, my SIL stepped in and bought the boys out. So MIL still lives in Ridiculously Huge House and has not a dime to her name because this house costs a fortune to maintain. SIL is now writing the whopping check every month. Let’s just say this annual amount would handle the COA of any college discussed here on CC.
Moral of the story? Make sure you are settled into a place you can spend the rest of your life in BEFORE you reach the age when you are not all that into moving. This situation was really horrible for all involved. But if my MIL had just agreed, about 10 years ago, to move out of Ridiculously Huge House and into a nice retirement community, she would not be flat broke and we could have avoided that whole mess. But by the time she was pushing 90, she was NOT GOING ANYWHERE. We told our kids that we promise to not do that to them and get ourselves situated before we become impossible to deal with.
Oh, and don’t make your kid the executor of your estate if you also leave no $ to that kid. It is just bad manners. Won’t end well.
Seems sensible if you and your brother are comfortable enough plus large estates can shed a lot of income in your lifetime.
@Hoggirl Do you think there’s a chance your friend’s son actually suggested this change to his grandparents in order to benefit himself? There is such a blatant conflict of interest there, I really hope the grandparents would be willing to add a clause requiring a certain percentage to be paid out annually for the benefit of the two daughters, or I predict that things will get ugly in the future. My ex-husband’s extended family has a lot of money, and the number of lawsuits, relatives not speaking to each other, siblings trying to increase their own benefits to the detriment of others, children forging documents and stealing from their parents, etc., that goes on when large sums of money are at stake is truly mind-blowing. It’s much more prudent to name a neutral third party, like a bank or other fiduciary, as trustee, and stipulate exactly how much should be paid out annually to the two daughters, so your friend and her sister are not forced to beg their son/nephew for money that came from their own parents (especially when it’s to his benefit not to give them anything!).